Big Four Make a Comeback in Thought Leadership

Big Four Make a Comeback in Thought Leadership

By Fiona Czerniawska

The large audit firms were the first to compete with McKinsey and its peers for a lucrative slice of the consulting market back in the 1960s.They have since undergone enormous change due to consolidation and regulation, resulting in a smaller number of big firms and the sale of some consulting operations.

In the last couple of years, three of the ‘Big Four’ firms have rebuilt their consulting practices and this group is once again a force to be reckoned with, as evidenced by their recent performance in thought leadership (reports, articles, white papers, and books).

Of the Big Four firms, PricewaterhouseCoopers (PwC) produced the most thought leadership in 2006 with 5 percent of the global market, putting them in third place after McKinsey and Accenture. PwC’s nearest Big Four rival is Deloitte with 3 percent of the thought leadership market.

This is a reversal from 2005, when Deloitte outperformed PwC in volume terms and suggests that Deloitte may either be investing less in thought leadership or has simply not managed to keep pace with its immediate rival as the battle for the intellectual high ground intensifies. KPMG and Ernst & Young, having only recently returned to the consulting market, are still producing relatively small amounts of thought leadership.

In an overall ranking of the global consulting firms, PwC scores highly for differentiation (the originality or distinctiveness of their conclusions); Deloitte leads in resilience (the depth of thinking and/or the extent of research evident); and Ernst & Young heads the list for commercialization (the likelihood that the material will encourage the audience to take action). While KPMG produces more material than Ernst & Young, it doesn’t have a specific focus and seems to be suffering from a lack of investment.

The Big Four firms appear to model their thought leadership positioning on that of the pure strategy firms. Economics and market studies and strategy formulation account for almost half of their output, well ahead of more operational topics such as technology or business processes. In terms of sector focus, PwC is particularly strong in energy/utilities, media and leisure, and retail. Deloitte is strong in public sector and retail.

PwC is also strong on mergers, acquisitions, and alliances. In fact, it is ranked above Bain in terms of quality on this topic. Within this area PwC focuses its attention on individual sectors, particularly the energy/utility industry.

Material on governance issues accounted for 3 percent of the total thought leadership market in 2006 and is one of the key areas on which the Big Four firms are focusing. The clear leader (in volume) here is Ernst & Young with 22 percent of the market. This gives the firm more than a fifth of all material on this topic, well ahead of its nearest rivals, BearingPoint and PwC.

If anything, regulatory changes have been a bigger driver for growth when it comes to thought leadership on reporting issues. Again Big Four firms are prominent here, but the market is dominated by PwC, which generates more than 40 percent of all thought leadership on this topic and has a clear lead in terms of quality.

Corporate Social Responsibility (CSR) never seems to have quite taken off as a focal point for thought leadership, perhaps because consulting firms have struggled to identify commercially-viable propositions in this area. Ernst & Young dominates this market, generating more than a third of all material. However this picture is very misleading, as the actual volume of material here is very small.

The Big Four firms with their global resources and strong brands pose a significant threat to their rivals in the consulting space. With the right levels of investment and the right sector and issue focus their thought leadership programmes could easily overtake those currently sitting at the top of the global rankings.

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Fiona Czerniawska is the author of White Space 2007, a research report that evaluates the latest thought leadership published by the top global consulting firms, identifying those that produce the most, the best, and the worst material across a range of subject areas and sectors. For more information, go to www.arkimeda.com.